Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the best alternative that you forgo when making a decision.

Question 2

A student decides to attend college instead of working full-time. If tuition is $$10,000, books cost 1$$,000, and forgone wages are $15,000, what is the total opportunity cost of attending college for one semester?

Accepted Answer

$$\10$$,000 + \$$1,000 + \15$$,000 = \$$26,000$$

Question 3

Which of the following is NOT considered a resource in economics?

Accepted Answer

Money

Question 4

In the context of the Production Possibilities Frontier (PPF), what does a point inside the PPF represent?

Accepted Answer

Inefficient use of resources or unemployment

Question 5

Which economic system relies primarily on supply and demand to determine prices, wages, and production?

Accepted Answer

Free market economy

Question 6

If a society moves from producing 400 consumer goods and 500 capital goods to 500 consumer goods and 400 capital goods, what is the opportunity cost of producing 100 more consumer goods?

Accepted Answer

100 capital goods

Question 7

Which statement best illustrates the law of increasing opportunity cost?

Accepted Answer

As more of a good is produced, the opportunity cost of producing additional units increases.

Question 8

Which of the following is a sunk cost?

Accepted Answer

The original price paid for a concert ticket that cannot be refunded.

Question 9

What is the marginal rate of transformation (MRT) on a PPF?

Accepted Answer

The rate at which society can trade one good for another in production, represented by the slope of the PPF.

Question 10

Which of the following statements is an example of positive economics?

Accepted Answer

"The unemployment rate will decrease if the government increases spending."

Question 11

A country experiences technological advancement in producing capital goods. What happens to its PPF?

Accepted Answer

The PPF shifts outward, especially in the direction of capital goods.

Question 12

Which reasoning method is used when economists move from specific observations to a general rule?

Accepted Answer

Inductive reasoning

Question 13

According to Ockham's Razor, what should economists do when constructing models?

Accepted Answer

Focus only on relevant variables and cut away irrelevant details.

Question 14

Which fallacy is committed when someone assumes that what is true for one individual is true for the whole group?

Accepted Answer

Fallacy of composition

Question 15

If a society is operating at a point outside its PPF, what does this indicate?

Accepted Answer

The society is producing unattainable combinations of goods given current resources and technology.

Question 16

Which of the following is NOT an assumption of the PPF model?

Accepted Answer

Resources are unlimited.

Question 17

A society increases its labor force. What is the likely effect on its PPF?

Accepted Answer

The PPF shifts outward.

Question 18

Which of the following best describes a mixed economy?

Accepted Answer

An economy with elements of both command and free market systems.

Question 19

If the slope of the PPF between two points is $$-2$$, what does this mean in terms of opportunity cost?

Accepted Answer

To produce one more unit of the good on the x-axis, society must give up 2 units of the good on the y-axis.

Question 20

Which of the following is an example of a normative economic statement?

Accepted Answer

"The government should reduce taxes to stimulate economic growth."

Foundations of Microeconomics: Scarcity, Opportunity Cost, and the Production Possibilities Frontier

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